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Home , Alibaba Group, Baidu, Baidu Music, Baidu Space, Instant messaging, Ma Huateng

B.A.T: (, Alibaba, ) An Overview of the Big Three Chinese and E-Commerce Companies. KraneShares is dedicated to raising awareness of opportunities in ’s economy & capital markets among global investors Baidu – Alibaba – Tencent (BAT)

• BAT companies generated revenue of $20 billion in 20131 and $8.16 billion in Q3 2014.2

• The aggregate market value of the three companies equals $473 billion.3

• The companies are internet and e-commerce ecosystems involved in both distinct and competing markets.

• The BAT core businesses are distinct: Baidu – search, Tencent – games & (IM), Alibaba (e-commerce).

• They increasingly compete with one another.

• Boutique firms have carved out niches that allow them to compete with BAT or partner with them to leverage their core business’ audience.

Alibaba and Baidu logo used with company permission. "Tencent Logo" by Tencent - Tencent. Licensed under Public domain 1.) Source: Baidu and Tencent 2013 annual reports, Alibaba SEC initial public offer filing (May, 06, 2014) via Wikimedia Commons - http://commons.wikimedia.org/wiki/ 2.) Baidu, Alibaba, Tencent Q3 2014 earnings reports File:Tencent_Logo.svg#mediaviewer/File:Tencent_Logo.svg 3.) Source: Based on January 20, 2014 market cap from Bloomberg BAT & Beyond Baidu Is The Largest In China & Fifth Largest Website Globally. It is the leading Internet Search Provider.¹

Robin Li’s Official Biography² Robin Yanhong Li is co-founder, chairman and of Baidu, and oversees Baidu’s overall strategy and business operations. Mr. Li has been serving as the chairman of the board of directors since the company’s inception in January 2000 and as the chief executive officer since January 2004. Mr. Li served as the president from February 2000 to December 2003. Prior to founding the company, Mr. Li worked as a staff engineer for , a pioneer in the internet industry, from July 1997 to December 1999. Mr. Li was a senior consultant for IDD Information Services from May 1994 to June 1997. Mr. Li currently serves as an independent director and chairman of the compensation committee of New Oriental Education & Group Inc., a NYSE-listed company that provides private educational services in China. Mr. Li also acts as the vice chairman of the of China (ISC). Mr. Li has also been a vice chairman of All-China Federation of Industry & Commerce since December 2012. Mr. Li received a bachelor’s degree in information science from in China and a master’s degree in science from the State University of New York at Buffalo.

Source: ¹ Baidu’s 2013 Annual Report as sourced from Alexa.com as measured by average daily visitors ² Baidu’s 2013 Annual Report Photo Source: ”Robin Atlas http://baike.baidu.com/picture/2375/2375/0/314e251f95cad1c8f698ac317c3e6709c93d5180? 李彦宏 fr=lemma&ct=single. Baidu Co-Founder Licensed under Creative Commons Attribution 2.0 via Baike Baidu File:314e251f95cad1c8f698ac317c3e6709c93d5180.gif While search revenue rises, Baidu has historically generated more revenue than its peers

China Search Engine Market Revenues Q3 2012 – Q2 2014 Shares of China Major Search Engine Companies 43.6% 37.2% 35.2% 35.4% 40.7% 48.8% 56.6% 58.5% By Revenues Q3 2012 – Q2 2014 100% 13.1% 2.4% -6.6% 25.2% 17.5% 8.3% -1.7% 26.8% 3.0% 3.2% 3.3% 3.3% 3.2% 3.6% 3.7% 3.8% 14.7% 15.1% 14.4% 13.1% 12.4% 12.1% 12.0% 10.9% 15 14.7 80%

11.8 11.6 12 10.9 60% 9.3 9 7.8 7.9 7.4 40% 80.6% 79.7% 80.4% 81.4% 81.4% 80.6% 81.7% 81.4% 6

20% 3

0 0% Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Baidu China 360 Search Other Revenues (bn Yuan) % Quarter over quarter growth % Year over year growth Note: Revenues of search engine companies refer to the sum of revenues of search engine operators, Note: Revenues of search engine companies refer to the sum of revenues of search engine operators, excluding the revenues of search engine channel agents. excluding the revenues of search engine channel agents. Source: the financial results published by enterprises, interviews with experts and iResearch Source: the financial results published by enterprises, interviews with experts and iResearch statistical model. statistical model. ©Nov. 2014 iResearch Global Inc. www.iresearchchina.com ©Nov. 2014 iResearch Global Inc. www.iresearchchina.com

Source: iResearch’s Rapid Development of Mobile Devices Boosts Search Market Growth, Nov 2014 The Baidu Eco-System

Search • Baidu Search Engine • IQiyi () • Qunar (online travel search and deals) • Baidu (digital music service) • Nuomi (entertainment, dining, health, and beauty services) Products Social-Networking Products • Baidu Anti-Virus • (a -like personalized website) • Baidu Album (cloud based photo sharing and storage) Mobile Related Knowledge Products • 91 Wireless (mobile games) • Baidu Know (a Wikipedia-like information sharing) • Baidu Developers and Webmasters • Baidu Wenku (Similar to or Drop ) • Baidu Open Cloud

Location Based Products & Services • Other • Baidu Navigation • Baidu Wallet (online and mobile payment service • Baidu Travel similar to PayPal) Baidu Has Historically Delivered Strong Results

Baidu Revenue & EPS

31.9 29.83 30.02

22.3 18.99 14.5 10.1 7.9 4.5 4.27

FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

Revenue (RMB billlions) EPS GAAP (RMB)

Source: Bloomberg, EPS = Earnings Per Share, GAAP = Generally Accepted Accounting Principles, RMB = China’s Currency Tencent’s Instant Messaging Platforms Have 438 million Users1

Huateng (Pony) ’s Official Biography2 Pony Ma, one of the Core Founders, Executive Director, Chairman of the Board and Chief Executive Officer of Tencent. Pony oversees the strategic development, overall direction and management of the Group. Before he founded Tencent in 1998, Pony was in charge of research and development for Internet paging system development at China Motion Telecom Development Limited, a telecommunications services and products provider in China. He has over 20 years of experience in telecommunication and Internet industries. Pony received his Bachelor of Science degree in Computer Science from University in 1993.

Source: 1.) Tencent’s 2014 Interim Report as of quarter ended June 2014, 2.) According to Global Web Index

Photo Credit ”Ma Atlas”, http://baike.baidu.com/picture/ 2365/2365/0/342ac65c10385343ec31fa119013b07eca808807?fr=lemma&ct=single. 马化腾 Licensed under Creative Commons Attribution 2.0 via Baike Baidu File: 342ac65c10385343ec31fa119013b07eca808807-1.gif Tencent Core Founder The Tencent Eco-System

Social Networks E-Commerce • QQ – PC & Mobile IM • JD.com (Partnership) • Weixin/WeChat – Mobile IM, Voice Message, • Tenpay – PayPal-like service Personal home page • Online to Offline (O2O) • Tencent Microblog • – Personal home page, , Games

Online Games Content & Online Entertainment • Mini Casual Games • Sogou • Advanced Casual Games • Tencent News • Multiplayer Online Games • QQ Music • Web Games • QQ Mail • Mobile Games •

Source: Tencent Product List available on Tencent.com/en-us/ir Tencent Has Historically Delivered Strong Results

Tencent Revenue & EPS

60.4

43.9

28.5 19.6 12.4 0.57 0.89 1.12 1.39 1.69

FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 Revenue (RMB billions) EPS GAAP (RMB)

Source: Bloomberg, EPS = Earnings Per Share, GAAP = Generally Accepted Accounting Principles, RMB = China’s Currency Beyond BAT – Boutiques Partnering With or Competing

Online Travel Online Gaming • C-Trip • Netease • YY • Qunar – Baidu Partner • Perfect World • Elong Search • Games • Online Auto Sales Real Estate • Bita News • Soufun • Autohome • Sina • Job Search E-Commerce • 51 Jobs • JD.com – Tencent Partner Online Videos • Vipshop • - Alibaba Partner Comprehensive Provider • E-Commerce China Dang • V1 Group • 58.com – Tencent Partner • Lightinthebox Anti-Virus – Tencent Partner

Source: KraneShares Automotive Sales Have Benefitted From Increased Urbanization

New Vehicle Sales: China 2005-13 21.993M Passenger and Commercial Vehicle Sales 21.993M 20M 17.928M Passenger Car Sales 17.93M 15M

10M

5M

Urban vs. Rural Population: China 2005 – 13 750 731.110 700

650 629.610 n China Rural Pop. 629.610 600 n China Urban Pop. 731.110 550 2006 2007 2008 2009 2010 2011 2012 2013 CNVSTTL Index (China Automobile Sales Model Type Total) China Urbanization Year ©Bloomberg L.P 18-Sep-2014 Source: Bloomberg, China Automotive Information Net, National Bureau of Statistics China, Sep 2014. Chinese Tourism Is Growing As Evidenced By Airline Travelers Both Domestic & Internationally (Chart In Millions)

35

Airline Passengers In Millions On A Monthly Basis, 30.607 Includes Domestic and International Travel 30

25

20

15

2008 2009 2010 2011 2012 2013 2014

Source: Bloomberg, Sep 2014 The Gross Merchandise Value (GMV) Has Risen Due to Increased Domestic and International Travel

Gross Merchandise Value (GMV) of China Online Travel Revenues of China online travel agencies (bn Yuan) Q1–Q3 2014 5 75.5 4 80 64.4 4 3.4 60.0 56.3 59.5 3.2 3 3.1 52.1 2.7 60 48.3 3 2.5 40 2 20 1 0 0 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14

GMV of China Online Travel (bn Yuan) Revenues of China online travel agencies (bn Yuan)

38.0% 32.6% 23.3% 23.6% 25.8% 27.0% 25.0% 20.3% 21.6% 22.9% 21.4% 20.1% 23.2% 22.3%

15.2% 17.3% 20.6% 17.9% 4.3% 7.9% 5.8% 8.1% -6.2% 6.4% 8.0% 0.9% 3.6% -7.3% Year Over Year Growth Quarter Over Quarter Growth Year Over Year Growth Quarter Over Quarter Growth

iResearch’s January 2015 Report titled China Major Online Travel Companies Put Extra Stress on Mobile Business in Q3 2014 Are the Primary Source of Entertainment in China

China Online Video Revenues Q3 2012 – Q2 2014

8 6.2 6 4.4 3.7 3.9 3.1 4 2.5 2.8 2.3 2 0 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14

Revenues (bn Yuan)

99.6% 59.6% 68.1% 49.6% 42.7% 51.1% 27.0% 32.0% 60.0% 34.8% 12.4% 12.4% 19.1% 18.7% -16.2% -11.8%

Year Over Year Growth Quarter Over Quarter Growth

Source: China Online Video Market Surges 83.2%, November 4, 2014 Trends Benefiting BAT & Beyond China Internet user population (in millions)

Urbanization 790 731 669 618 564 Domestic Consumption 513 457 384 Internet Adoption 298

Mobile and Usage

2008 2009 2010 2011 2012 2013 2014E 2015E 2016E

Source: Chart from Alibaba’s SEC Filing, May 6, 2014 Top Ten Holdings As of 12/31/2014. Symbol and Exchange % HOLDING ADR NYSE: BABA 10.097 TENCENT HOLDINGS LTD HK: 0700 8.614 BAIDU.COM, INC. ADR : BIDU 8.156 JD.COM INC-ADR NASDAQ: JD 7.001 NETEASE.COM INC ADR NASDAQ: NTES 6.15 CTRIP.COM INT'L ADR NASDAQ: CTRP 4.098 NASDAQ: SINA 4.093 YOUKU.COM INC ADR NYSE: YOKU 4.058 QIHO 360 TECHNOLOGY LTD NYSE: QIHU 3.887 VIPSHOP HOLDINGS LTD ADR NYSE: VIPS 3.81

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